China's textile exports face pressure from India

China's textile and clothing exports rose to record levels of $12.72 billion in November but could soon lose their comparative advantages in costs to developing nations like India, the state media reported today.

China's textiles exports were up by 30.85 per cent from November 2005, the highest monthly growth in two years, according to the latest customs figures.

However, experts warned against believing this high level indicative of a new wave of rapid export growth. "It's only a temporary flourishing before fading away," the China Securities Journal reported today.

The paper attributed the hike to export firms that were catching their last chance to benefit from higher export tax rebates. As the textile industries of India, Pakistan and the Association of South East Asian Nations (ASEAN) are developing fast, the Chinese textiles exporters are facing the heat from them in the region, it said.

The Ministry of Commerce announced in September that tax rebates for textile exports would be cut from 13 to 11 per cent, but companies that signed export contracts before September 14 and cleared their goods through the customs before December 14 could still claim the original tax rebates.

The government had hoped the measure would force domestic textile firms to be more aware of technical innovations and to develop more products with proprietary intellectual property rights The move coupled with the appreciation of the Chinese currency, Renminbi, however, has pushed Chinese textile manufacturers to mark down their prices this year to sustain their exports and offset the negative impact of the rising yuan.

"The sudden hike in November will not last long. A decline will appear in December," the newspaper reported, adding that overcapacity would continue to haunt the industry despite the rising domestic demand.

Figures from the National Bureau of Statistics show retail sales of clothing in China climbed 21.5 per cent in November. The growth was 7.4 percentage points higher than the average. In future, the focus of China's textile and clothing industries would gradually shift from abroad to home, the newspaper said.

After the European Union and the United States set caps on China's textile exports in January, more than 69 per cent of China-made textiles and clothing have gone to the ASEAN, South Korea and African countries.